GMAC Mortgage Halts Evictions, Foreclosed Home Sales

In April, Luis Fitzgerald and his wife Miriam were, in his words, "literally kicked out" of the foreclosed Orlando, Fla., home they purchased a decade ago.

In Florida and other states with judicial foreclosure laws, banks must file a summary judgment motion in order to take possession of a property where the owners have defaulted on a loan. The motions must be backed by an affidavit from a "witness" who has reviewed the files and confirmed that the lender actually owns the mortgage note.

"Now I see the affidavit in my case was signed by the guy who was all over the news -- the so-called Robo-signer," said Fitzgerald, who has hired an attorney in a bid to recover his home.

Business Report (09.16.10)

Fitzgerald was referring to Jeffrey Stephan, a foreclosure specialist with GMAC Mortgage, one of the nation's largest and most troubled home lenders. In a sworn deposition, Stephan has said that he signed about 10,000 foreclosure affidavits per month without personally verifying the documents associated with the case.

GMAC Mortgage, a unit of Ally Financial Inc., which is majority-owned by the U.S. government, announced this week that it was suspending sales of foreclosed homes and evictions of borrowers who have fallen behind on the mortgages in 23 states. In a statement, the company said the temporary suspensions were intended to give it time to review its procedures.

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Foreclosure lawyers said the action could highlight problems with other lenders that may have illegally driven homeowners out of their homes. It also offers a glimpse, they said, into an overloaded foreclosure process in desperate need of change.

"The problem with foreclosures is that we have short-circuited all of the legal processes and safeguards that our courts are supposed to provide," said Matthew Weidner, a real estate lawyer in St. Petersburg. Fla.

"Now, they've started just spitting out tens of thousands of these documents. Lenders are getting real nervous," he said. "The fundamental process, the basics that we use to try and take a consumer's home is flawed."

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Gina Proia, an Ally spokeswoman, said in a statement that an "internal review has revealed no evidence of any factual misstatements or inaccuracies" in the legal documents.

The company would not say how many homeowners would be affected by its suspension of evictions and foreclosure sales. It expected the review to be completed in anywhere from a few weeks to the end of the year. Ally said the delay would not affect newly defaulted loans.

Proia said Stephan, who could not be reached for comment, was still employed by the company. She would not say whether he still handled foreclosures.

Since the start of the foreclosure crisis in 2008, it has become common for plaintiffs' lawyers and servicers to assign an employee to sign hundreds of affidavits, even though the signers usually are not familiar with the cases, according to foreclosure lawyers.

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In courts around the country, some judges have raised questions about what amounts to a virtual assembly line of foreclosure affidavits in attempts to speed up the arduous process.